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High Court Rules Trustee Can Face Cheque Bounce Charges Without Naming The Trust Entity
The has issued a definitive ruling regarding the legal accountability of trustees in cases. In the case of , the Court held that a initiated under , remains against a trustee who signed a cheque, even if the trust itself is not named as an accused in the proceedings.
Case Background
The dispute arose from a commercial transaction between the respondent, Sajjan Kumar Agrawal, the proprietor of , and a trust named "." The respondent had supplied hardware materials valued at ₹22,42,145 for construction projects under the Swachh Bharat Scheme. Upon the failure to clear the outstanding debt, a cheque was issued from the account of the trust. When the cheque was dishonoured due to insufficient funds, the respondent initiated criminal proceedings against the petitioner, a trustee associated with the organization.
The petitioner approached the High Court under , seeking to quash the proceedings on the grounds that the trust was not arrayed as a party, rendering the complaint legally deficient.
Arguments Presented
Counsel for the petitioner argued that since the transaction was conducted on behalf of the trust, the (the trust) was a mandatory party to the . They further contended that the complaint was filed prematurely, violating the mandatory notice requirements of the Negotiable Instruments Act.
Conversely, the respondent relied on the recent authoritative pronouncement of the in Sankar Padam Thapa v. Vijaykumar Dineshchandra Agarwal (). The respondent asserted that this precedent explicitly overruled previous conflicting rulings, confirming that individual trustees can be prosecuted for dishonoured cheques issued in their capacity as signatories, regardless of the trust’s formal status as an accused.
Legal Analysis
Justice Sibo Sankar Mishra emphasized that the legal status of a trust does not shield a signing trustee from under the Negotiable Instruments Act. Citing the Supreme Court’s reasoning, the Court clarified that when a trustee signs a cheque, they are fundamentally responsible for the liability arising from that instrument. The High Court further noted that the judicial system must not remain stagnant; when the apex court provides a clear clarification, lower courts are bound to follow it, regardless of whether a reference to a larger bench is pending in unrelated matters.
Key Observations
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"When a arises on account of dishonour of a cheque and a complaint is instituted under the , the same is against the Trustee who has signed the cheque, without any requirement of arraying the Trust as an accused."
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"It is not open, unless specifically directed by this Court, to await an outcome of a reference or a , as the case may be."
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"The jurisdiction under is to be exercised sparingly and with circumspection."
Court's Decision
Finding no merit in the petitioner's arguments, the dismissed the petition. The Court affirmed that the passed by the learned , was based on sufficient material. This decision strengthens the legal position of creditors, ensuring that individuals managing trust funds cannot evade accountability for financial transactions merely by omitting the trust entity from litigation. The criminal proceedings are now set to continue before the trial court.
